When and How May the BTA Change the Allocation of Value Between Land and Improvements?
On February 8, Ohio’s Tenth District Court of Appeals issued its decision in Columbus City Schools Board of Education v. Franklin County Board of Revision, 2022-Ohio-355. The court determined that the Ohio Board of Tax Appeals (“BTA”) had incorrectly allocated the value of each of two parcels of real property between the land and the improvements thereon. The Tenth District Court of Appeals decision involved two parcels in Columbus, Ohio, both containing apartment complexes, and both subject to 15-year, 100% tax abatements on the value of vertical improvements. Depending on the tax year in which the abatements commenced, the issue being litigated likely only affects a relatively small amount of tax due for the foreseeable future since the tax only applies to the land values. The Columbus City Schools Board of Education (“BOE”) had filed complaints on each property with the Franklin County Board of Revision (“BOR”), seeking an increase in the taxable value of each. The BOE provided appraisal reports and testimony from a professional appraiser. In addition to providing an increased value to each of the properties, the appraisal reports reallocated the value between land and improvements, as well as a small value assigned to furniture, fixtures, and equipment. The property owners did not present evidence or testimony at the hearing, relying instead on their cross-examination of the appraiser. The BOR maintained the auditor’s taxable value for one of the properties and increased the taxable value of the other. The BOE appealed both decisions to the BTA. The BTA granted the owner’s motion to consolidate the two cases. Both parties waived hearing before the BTA and submitted written briefs. In its decisions, the BTA adopted the appraised values of both properties as submitted by the BOE. This increased the total value of each property. However, the Board did not accept the appraiser’s allocation of the value between the land and the improvements, falling back on the auditor’s initial valuation. The BOE appealed the BTA’s decision to the Tenth District.
ZHF Comment: The appraiser had allocated more of the value to the land, both in absolute terms and as a percentage of the total. The BTA’s percentages allocated to the land were between 9 and 9.5%, while those of the appraiser were between 12 and 15%. The BOE would stand to benefit from a greater allocation to the land, because the land was not subject to abatement.
The Tenth District Court of Appeals decided in favor of the BOE, basing its decision on evidentiary grounds. The court agreed with the BOE that the only competent and probative evidence in the record was that of the BOE’s appraiser. Moreover, the appraiser’s valuation negated the auditor’s original value and the property owner failed to present a rebuttal of the appraiser’s valuation. While there was some dispute, going back to the BOR hearing, as to whether it was proper for the appraiser to use the income method rather than the cost method to value the property, and as to whether the land should have been valued as if vacant or improved, the court’s ultimate decision was based on the simple fact that the appraisal reports had been judged by the BTA, “overall to be competent, credible, and probative evidence with regard to the total value of the subject properties that negated the auditor’s initial valuation.” Yet despite that judgment, the BTA had rejected the appraiser’s allocation of value between land and improvements. The reason for the BTA’s rejection of the appraiser’s land valuation is unclear from the BTA’s statements in the decisions, including its decision in the motion for reconsideration brought by the BOE for one of the properties. The court held that the BTA had the responsibility to independently determine the value of the property, including the allocation between land and improvements, and the only basis on which to make this determination was the appraisal reports submitted by the BOE. As these reports negated the auditor’s valuation, and no evidence was provided to support the auditor’s valuation, the court held that the BTA erred in returning to the auditor’s allocation of value. The case was remanded to the BTA to correct this error.
ZHF Comment: The total value of real estate tax at issue in these cases is not significant, yet the parties nonetheless litigated the matters through the BTA, then the Court of Appeals, and now the matter is back at the BTA for a second time so that the BTA may properly address the allocation issue.
 Cols. City Schools BOE v. Franklin Cty. BOR at ¶ 28.